Cost /Revenue

 "Dear friends,Hope you are doing well!!This is my fifth post related to micro-economics ,I hope it will benefit you a lot in studying 

 CHAPTER 5: COST/REVENUE

 Cost /Total cost: It refers to total expenditure incurred in producing a product /all product.

Total variable cost/primary cost/direct cost:It refers to those cost which is directly related to production (output)

Total Fixed cost/Secondary cost/overhead cost/supplementary goods:It refers to those cost which is not directly related to production (output)

Fixed cost remain same with the change in level of production.

Average total cost:It is the ratio of total cost to quantity Produce

                                ATC: TC

                                           Q

Average fixed cost :It is the ratio of total Fixed cost to quantity Produce

                                ATC: TFC

                                            Q

Average Variable cost :It is the ratio of total Variable cost to quantity Produce

                                ATC: TVC

                                           Q

Relationship Between TC/TVC/TFC (numerical)

                            (TC=TVC+TFC)

Relationship Between ATC/AVC/AFC(numerical)

  TC=TV+TFC(Dividing both side by Q)

  TC=TVC+ TFC

  Q            Q

ATC=AVC+AFC

MOC(Marginal opportunity cost )

 It is the ratio of sacrifice of one commodity for every add production of another commodity.

MC(Marginal Cost)

 It is the rate of change in total cost by producing every additional unit of commodity.

Important: why gap between ATC &AVC Curve became narrow?

  As the output increases ,the gap between Ac and AVC curve decreases because the difference between AC/AVC is  AFC which always decreases as the output increase but AC and AVC never interest each other because the difference between AC and AVC is AFC which can never be 0.

          

Difference between variable cost and fixed cost.

  Variable Cost                    

 which are directly   related to the production,  changes due to level of output  ,  shape of variable cost is Inverted (S) .  

Fixed cost.

   It is not directly related to the production .It remain constant with the change in the level of output ,shape of fixed cost is Horizontal straight line parallel to X- axis                                                                                                           

                                    

Implicit cost: Implicit cost are the cost of self employed and self owned resources

Explicit cost: Explicit cost are those cost payment which firm make a outsider for hiring services and goods.

                                                 II:REVENUE

Total Revenue: It is the total amount of money  received by the firm from selling a given level of                                      output (TR=P x Q).

Average Revenue: It is the ratio of total revenue to quantity sold

                                                   or

                             It refers to revenue per unit quantity sold 

                                         ( AR=TR/Q)

Marginal unit: It is rate of change in total revenue by selling every additional unit of the commodity

                            (MR=TRn-TRn-1)

                                                                   -X-X-X-X-

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